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Securities regulators must be prepared to ramp up their oversight of investment firms using artificial intelligence (AI) and machine learning, the International Organization of Securities Commissions (IOSCO) says.

The umbrella group of global securities regulators published a final report, along with new guidance, for both regulators and the industry regarding the growing use of AI in the investment industry.

According to the report, firms are increasingly deploying AI and machine learning in their trading and advisory businesses, as well as in risk management and compliance.

The regulators said that while these technologies have the potential to reduce the cost of investment services, they could also “create or amplify risks, potentially undermining financial market efficiency and harming consumers and other market participants.”

As a result, regulators should be focused on mitigating risks and preventing consumer harm in the use of AI and machine learning, IOSCO said.

To that end, its guidance sets out measures that aim to ensure that asset managers and brokerage firms have proper governance and controls over their use of AI, qualified staff and robust testing. Firms must also provide transparency to investors, regulators and others about their use of the technology.

“The use of AI and ML will likely increase as the technology advances, and it is plausible that the regulatory framework will need to evolve in tandem to address the associated emerging risks,” the report said.